Capital Markets

CMA seeks return of tax incentive for listing firms

CMA Policy and Strategy Director Luke Ombara
CMA Policy and Strategy Director Luke Ombara. PHOTO | SALATON NJAU | NMG 

The Capital Markets Authority (CMA) wants the National Treasury to reinstate tax incentives for listing firms that were lowered in recent law amendments.

CMA says the lowering of the incentive and the introduction of value added tax (VAT) on brokerage services revenue looks set to hurt the attractiveness of Nairobi Securities Exchange (NSE) to potential listings.

CMA director of policy and regulation Luke Ombara said the regulator will be putting a case against the changes that were introduced by Tax Laws (Amendment) Act, 2020.

“We want to look at how we can reverse this because it has an adverse impact. We saw what capital gains tax did to the NSE and we still feel the impact to date,” said Mr Ombara.

CMA acting CEO Wycliffe Shamiah said they will be explaining to the Treasury why they need the reversal despite government taking the decision to boost tax revenues.


The Treasury scrapped the preferential tax treatment of between 20 per cent to 27.5 per cent that was enjoyed by new issuers for up to five years depending on how much stake they offered to the public.

The tax was then set at a flat rate of 25 per cent, lowering the incentive for a company to offer a higher stake to the public when joining the NSE.

The NSE is going through a listing drought.

The last initial public offer was from Fahari Reit, which received a subscription rate of 29 per cent.

The Treasury also introduced a 14 per cent VAT on brokerage services. Stockbrokers warned that the cost will be passed to investors, making investing in shares and bonds expensive.

Kenya Association of Stockbrokers and Investment Banks (Kasib) had unsuccessfully lobbied for the Treasury to drop the tax.

It warned that VAT will lead to reduced liquidity and suppressed activity in the stock market as investors search for other places to earn higher returns.

Treasury had also proposed to introduce a 10 per cent withholding tax on interest earned from infrastructure and green bonds but this was dropped.